How do within-industry CVC investments shape industry concentration?

Corporate venture capital (CVC) investments can shape industry dynamics in different ways. On one hand, they provide financial resources, expertise, and credibility that help new ventures survive and grow, thereby fostering competition. On the other hand, incumbents can use CVC to absorb knowledge and capabilities from entrepreneurial ventures, strengthening CVC investors' market positions and limiting rivalry. Given these opposing forces, it remains an open question whether higher levels of CVC investments raise or lower industry concentration. This paper advances the literature by uncovering three mechanisms underscoring the impact of within-industry CVC investments (i.e., those with both investors and investees operating in the same industry) on industry concentration and conducting an empirical analysis across U.S. industries from 2001 to 2019. Results show that greater salience of within-industry CVC investments leads to higher industry concentration. The findings carry important implications for entrepreneurial ventures, incumbents, and policymakers.